Tour Operators Margin Scheme (TOMS)
Recent news
Page last reviewed November 2024.
Summary
How tourism is taxed is the most influential factor on business viability. The added value of intermediation is often poorly understood. Regarding VAT, the EU is at a disadvantage for three reasons: it taxes tourism exports, the price of holidays to non-EU destinations is VAT-free, and there is additional complexity due to the range of rates applicable (discounted VAT has been shown to support job-generation).
VAT reporting and collection is complicated in a business where costs are spread over many countries, among multiple service types, with buyers in the EU or worldwide. The Tour Operators Margin Scheme (TOMS) remains an intelligent simplification: it shares tax benefit between destination and EU operator’s country of establishment; it minimises the need for multiple registration; it is relatively easy to administer.
However, TOMS still taxes exports to non-EU clients. It does not apply to non-EU businesses selling EU product (there is very little volume in retail sales of EU travel product to non-EU consumers). Relocation driven by tax efficiency is often not open to small businesses. The service of packaging is often not understood as taking place where consumer or client are located, rather than where the package itself is delivered.
What you need to know
- The EU is reviewing how VAT should apply to travel and tourism: significant change is likely
- Understanding of how the travel trade works is often insufficient among policy makers
- There is an urgent need to illustrate the impact of options on business, EU and non-EU
- Publicly-funded tourism bodies cannot easily object to government policy
For note on UK application of TOMS from 2021, see Elman Wall newsletter.
ETOA’s policy objectives
- Exports of tourism products and services should not be taxed in destination
- Value-adding should be encouraged, among businesses of all sizes
- Ease of compliance, with better consultation and notice of change
What we are doing
- Lobbying and participation in expert group on legislative review
- Expert advice through seminars, online briefings and helpline
- Research and reports
Reforming TOMS: updates
November 2024: We are awaiting news of any regulatory progress as the new Commission forms in Brussels. The legislative package dealing with TOMS review also covers duty free sales and proposals for taxing passenger transport. As views vary among members states on the merits, and unanimity among EU27 is required, progress is challenging. More information here.
Tax reform is complex. At an EU level, significant regulatory change requires unanimity among all member states. Tax on tourism makes sense if it improves infrastructure and service. Looking after and making accessible Europe’s cultural and natural heritage requires funding. Taxation without benefit to the taxpayer may bring short-term relief to hard-pressed budgets, but it will cause long-term competitive harm.
